As an owner-operator, you know that slow paying customers can put a strain on your finances and make it tough to keep your operations running smoothly. The last thing you want is to turn down a load because you’re still waiting to get paid from a previous load, and you need the money for fuel or to cover other operating expenses.
Instead of waiting 30, 60, or 90+ days to get paid, many owner-operators and carriers turn to either factoring or taking Quick Pays from their broker. Both options will get you paid faster, but there are some key differences between the two.
Let’s go over the difference between factoring and Quick Pay:
What is Quick Pay?
Quick Pay is a faster payment option offered by some brokers where they advance a portion of the invoice upfront to the carrier in exchange for a small fee (typically 2% to 5% of the invoice). On average, a Quick Pay will get a carrier paid within 2-5 days after they’ve delivered the load.
It’s important to note not all brokers offer a Quick Pay program, and their fees and payment terms often vary. Brokers factoring with Quickpay Funding can send their carriers Quick Pays the same day their invoice is submitted.
Quick Pays can be a helpful option for owner-operators and carriers who need cash quickly. Instead of waiting on the typical net terms (such as net 30 or net 60), Quick Pays provide a significant cash flow advantage to trucking companies.
What is Factoring?
Freight factoring is a financing option where a trucking company sells its unpaid invoices to a factoring company at a discount in exchange for immediate cash.
The factoring company purchases the invoice from a carrier and advances a percentage of the invoice amount, typically around 70-90%, often within 24 hours of submission. The factoring company then takes over the responsibility of collecting payment from the customer. Once the customer pays the invoice, the factor deducts its fees (usually 2% to 5% of the invoice) and sends the remaining balance to the carrier.
Factoring fees can vary, but generally depend upon the volume and number of invoices being factored, the creditworthiness of the debtors and the amount of time the invoices remain outstanding.
So, if both factoring and Quick Pay get you paid faster, how do you know which option is best for your trucking business?
Key Differences Between Factoring and Quick Pay
Here is a table summarizing the key differences between factoring and Quick Pay:
|How it works||You sell your unpaid invoices to a factoring company for immediate cash.||You pay a broker a fee to get paid upfront for a load.|
|Timeframe||Funds are typically available within 24 hours.||Funds are typically available within 2-5 days.|
|Fees||Fees can be higher due to additional services and faster payment.||Fees can also be high, but sometimes slightly less than factoring.|
|Flexibility||You can factor almost any unpaid invoice and work with a variety of brokers and dispatchers.||Brokers only offer Quick Pay on their own loads.|
|Contract||Requires exclusive contract||Doesn’t require exclusive contract|
Another major difference between Quick Pay and factoring is the additional services factoring companies provide. Here are just a few of the additional benefits Quickpay Funding offers:
- 24/7 same-day funding – We fund your invoices the same day they are submitted, even on holidays and weekends.
- Carrier packet prep – Get all of your carrier packets and MSA’s filled out by us at no extra charge.
- Free broker credit checks – Book loads with confidence. We warn you of any risk when taking a load from a broker that has bad payments or questionable credit.
- No invoice/volume minimums – We don’t charge minimums. Factor only the invoices you need to reach your cash flow goals.
- Fuel discount program – We give all our clients the Quickpay Fuel Card that can save them thousands of dollars a year on fuel discounts from 4,500+ locations.
Which is Right for You?
The best option for you will depend on your specific needs and circumstances. Factoring is a more long-term solution for businesses that need to improve their cash flow. Quick Pay is a more short-term solution for trucking companies that need to get paid quickly for a specific load. If you’re only looking for a quicker payment solution and don’t mind the fees, then Quick Pay may be a good option for you if your freight broker offers it. However, if you want the additional services as well as more flexibility and control over your invoices, then factoring may be a better choice.